TOPIC III

What Are the Causes of Unethical Behavior in the Workplace?

What is an Unethical Behavior?

The Civil Service Commission of Philippines defined an unethical behavior as any behavior prohibited by
law. In a dynamic business environment, a ―large gray area‖ exists that makes it difficult and unclear to
distinguish what is ethical. An unethical behavior would therefore be defined as one that is not morally
honorable or one that is prohibited by the law. Many behaviors will fall in the classification including
corruption, mail and wire fraud, discrimination and harassment, insider trading, conflicts of interest,
improper use of company assets, bribery and kickbacks, compliance procedures, ethical relations with
others, disciplinary action, fraud, illegal business donations, patent infringement and product liability
(Barrcus & Near, 1991, 12). Unethical behaviors that stimulated interest in ethics include Watergate
events, Lockheed Scandal, the 1972 United States presidential election, illegal business donations and
bribery of foreign officials in order to induce business abroad (Carroll, 1978, 5). Today, the most
common ones are false communication, collusion, conflicts of interest, gifts and kickbacks, health
services providers‘ unfair practices, insider trading, discrimination and harassment, and embezzlement.

1. False Communications

False communications fall into various categories. They include falsification of auditor‘s or controller‘s
report or any form of manipulation that does not tell the whole truth. These include cheating on tax
returns or inappropriate depreciation schedule and wrong expenses (Brennan Jr., Valtz, Shallenberger &
Stanton, 1961, 164). Feeding the public with wrong report of the organization‘s business performance to
make the organization look good is another common practice. In 2001, Enron gave wrong information
about their loss because Ken Lay, the CEO of Enron, was advised by some trusted Enron executives to
report only $1.2 billion of the $7 billion in losses because it was felt that the amount could be explained
reasonably without doing more damage to the falling stock price of the company (Collins, 2007, 3).
Similar to this was the case of Manville Corporation. The top management of the Corporation
suppressed, for decades, evidence which proved that asbestos inhalation was killing their employees.

2. Collusion

Collusion, especially with competitors, to fix prices, is an unfair business practice today. This could be
considered stealing from customers. However, there are differences of opinion on whether or not price
fixing is stealing from customers (Brennan Jr., Valtz, Shallenberger & Stanton, 1961, 174).

3. Gifts and Kickbacks

Some organizations do not allow their employees to receive gifts from clients during normal course of
business. Those who do, generally provide guide lines on limitations as to the amount an employee can
receive as gift. Sometimes a buyer may request for kickbacks or entertainment which, if not provided,
may lead to the loss of the customer. An employee frequently receives pressure from the management
to behave unethically or to obtain profitable business at any cost, which may include the use of any
possible dirty tricks. The employees who desire to be retained or promoted have no choice but to dance
to the tune of the management. This is because there were cases of those who refused to behave
unethically the way management instructed and were fired or nearly fired (Brennan Jr., Valtz,
Shallenberger & Stanton, 1961, 165).

4. Conflict of Interest

Conflict of interest occurs when ones private interest interferes or appears to interfere in any way with
the interest of the organization. According to Sliglitz, it can be argued that there is no conflict of interest
because, based on Adam Smith‘s view, the individuals, when pursuing their own self-interest are
actually pursuing the general interest of society (Sliglitz, 2003, 2). Some

examples of conflicts of interest are:

- diverting from the organization for personal benefit, a business opportunity,

- using the organization‘s assets for personal benefit,

- accepting any valuable thing from the organization‘s customers or suppliers, and

- having a financial interest in an organization‘s competitor.

Unethical practices in the Health Care Sector

There are three common unethical practices in the Health Care Sector. The first is refusing to provide
health care services to the patients who have no medical insurance. Some Health Centers do not admit
patients who have no insurance unless they can provide evidence that they have the ability to pay for
the health service. The second unethical practice in the health care sector is over treating patients to
boost income. The third is doing surgery at surgical centers instead of the hospital so that the doctors do
not have to ―pull call at any hospital‖

Insider Trading

Insider trading is an unethical behavior which occurs when a person who has access to confidential
information uses or shares the information for securities trading purposes or any other purpose except
the conduct of regular company business. The confidential information of the company are not to be
used for achieving personal gain neither are they to be disseminated directly or indirectly, to friends,
family members and other outsiders who may in turn trade on or misuse the information.

Discrimination and Harassment

Discrimination involves not providing equal opportunity in employment on merit but on other basis such
as race, sex, national origin, age, religion, or any other basis not related to the job. Harassment is a
derogatory comment or unwelcome sexual advances (FS Networks, Inc., 2004,
Wrong Doing

A large number of people, including top management, are involved in wrong doing both in the public
and in the private sectors. The managers of E.E. Hutton, for example, were found guilty of 2000 mail and
wire fraud. Similarly, the supervisors of a defense contractor were accused of falsifying time cards
(Gellerman, 1986, 85).

Why People Behave Unethically

Dedicated employees, who are usually honest, sometimes behave unethically because of four
rationalizations: that no one will ever find out, that the behavior is not really illegal, that it is in the best
interest of the organization, and that the organization will protect them. Although the costs of unethical
behavior are hard to measure, they can add, according to research, more than 20% to the cost of doing
business. The costs will include low wages, unemployment, and poverty. If top management wants to
improve organizational performance, they must stand firm that ethical methods are the only ways
business should be done.

Causes of Unethical Behaviors

The study that was commissioned by American Management Association (AMA) and which was
conducted by the Human Resource Institute (HRI) using 1121 managers and Human Resource experts as
participants, revealed that the leading cause of unethical corporate behavior is ―pressure to meet
unrealistic business objectives and deadlines.‖ The study also showed that the second leading factor
that causes unethical behavior is the desire to further one‘s career while the third leading factor is the
desire to protect one‘s livelihood (Schwartz, 2006, 1) and (MacDo, 2006, 1). Job pressure, according to
the study, causes employees to engage in unethical behaviors that include cutting corners on quality
control, covering up incidents and lying to customers. Ignorance is another major cause of unethical
behaviors. The study of (AMA) and (HRI), (MacDo, 2006, 1), revealed that the ignorance that the acts are
unethical and not knowing the seriousness of the consequences when caught, are causes of unethical
behaviors. Competition for scarce resources, power or position can cause individuals to engage in
unethical behaviors. Hosmer emphasized that an attempt to improve their corporate competitive
positions made managers to take immoral actions (Hosmer, 1987, 439). Bazerman and Banaji felt that
the cause of the unethical behaviors in organizations is the presence of a ―few bad apples‖ among
organizational actors (Bazerman & Banaji , 2004, 111). The primary cause of unethical behaviors can be
traced to lack of maintaining the type of consistent leadership that is necessary for running an ethical
organization. This exposes the employees to opportunities that make them engage in unethical
behaviors.

Conclusion

Today, there is a tremendous loss of confidence in corporate conduct and there is an urgent need to
work towards restoring it. Although ethics education seem to produce limited evidence of changing
behaviors, the commitment of management to monitor annual ethics education for all employees will
produce the desired favorable results. There should be clear communication to the employees of what
are honorable and expected behaviors in the organization. They must maintain and stand firm on a clear
cut policy that ethical methods are the only way of doing business. People act unethically for a number
of reasons. Unethical behavior is defined as behavior that contravenes rules designed to maintain the
fairness and morality of a situation. An example of unethical behavior is a representative of a company
taking kickbacks from a salesman for preferential treatment. Behavior like this is motivated by various
things.